Effect on Other Documents

Audience

SB/SE Collection and Campus Compliance and employees.

Effective Date

(09-27-2011)

Scott D. ReisherDirector Collection Policy

5.8.10.1
(09-27-2011)Overview

During the investigation of an offer in compromise (OIC), certain situations may be encountered that require consideration
before a final determination can be made. This section discusses how to treat these situations when evaluating an offer.

5.8.10.2
(09-27-2011)Bankruptcy

Bankruptcy may affect the Service's consideration of an OIC. The taxpayer may file bankruptcy and an OIC simultaneously, or
file an OIC in an attempt to avoid bankruptcy, or file an OIC after a bankruptcy has been concluded.

5.8.10.2.1
(09-27-2011)Offer in Compromise During Bankruptcy

The Service will not consider an OIC under its administrative OIC procedures while a taxpayer is in bankruptcy. When a taxpayer
files bankruptcy, the Bankruptcy Code provides procedures to resolve the Service's claim.

An OIC will not be considered under administrative OIC procedures until the bankruptcy is concluded. In Chapter 7 cases, an
administrative compromise with the taxpayer can be considered after the taxpayer has received a discharge. See IRM 5.8.10.2.3,
Acceptance of Offer in Compromise After Chapter 7 Bankruptcy. In Chapter 11, 12, and 13 cases, an administrative compromise
will not be considered until the taxpayer completes payments under the plan or the bankruptcy is dismissed by the court.

If a taxpayer is in bankruptcy when an administrative OIC is submitted or during a pending offer investigation, the offer
is returned as non-processable. The return of the offer does not constitute a rejection of the offer and does not entitle
the taxpayer to appeal the matter to Appeals. See Treas. Regs. § 301.7122-1(f)(5)(ii)

5.8.10.2.2
(09-27-2011)Offers in Compromise Before Bankruptcy

When a taxpayer or representative states during an offer investigation that a bankruptcy petition will be filed if the taxpayer’s
offer is not accepted, the offer examiner/offer specialist must determine whether the potential for a bankruptcy filing actually
exists and the impact the possible bankruptcy filing may have on the collection of the outstanding tax liabilities.In order to make an informed decision as to the reasonableness of the taxpayer's Offer in Compromise, consider whether the
taxpayer has been involved in previous bankruptcy proceeding(s) and/or if any tax liabilities may potentially be dischargeable
.The following procedures will assist in determining the impact a potential bankruptcy filing may have on the offer investigation.
Additionally, if the taxpayer or their representative indicates the taxpayer is considering filing bankruptcy, immediately
make a lien filing determination as to whether the filing of a notice of federal tax lien (NFTL) is necessary to protect the
government’s interest in assets during the offer investigation.

Benefits to the Service if an offer in compromise is accepted and the taxpayer does not file bankruptcy:

The Service can negotiate for amounts collectible from future income and from assets beyond the reach of the government, that
may not be collectible if the taxpayer files bankruptcy.

Negotiations may result in an offer amount that exceeds the amount recoverable in an insolvency proceeding.

Terms for payment of an offer may result in funds being collected in a shorter time than through bankruptcy.

The terms of the offer in compromise includes a requirement the taxpayer files and pays all tax liabilities for the succeeding
five years.

If a NFTL has been filed, the federal tax lien may survive bankruptcy against certain assets.

While evaluating the acceptability of an OIC when the threat of bankruptcy is a consideration, determine the reasonable collection
potential (RCP) as defined in IRM 5.8.5, Offer in Compromise - Financial Analysis. If the amount offered by the taxpayer exceeds
the RCP, proceed with the offer investigation and appropriate disposition. Any special circumstances or hardship issues should
also be considered prior to investigating the effect a potential bankruptcy may have on an acceptable offer amount.

Analysis of the potential amount collectible, if bankruptcy proceedings were filed, should include analysis of the taxpayer’s
collection information statement(s), other financial statements, draft bankruptcy schedules (if available), and a determination
of which liabilities may be dischargeable. This will result in the ability to make an informed decision regarding the OIC
and should open negotiation with the taxpayer.

When completing the analysis consider the following questions:

Is the taxpayer an individual? Although other entities could receive a discharge in an insolvency proceeding, as a matter
of policy, the potential bankruptcy filing of an entity other than an individual or from a taxpayer whose only liabilities
include employment taxes will not be a consideration when calculating reasonable collection potential for purposes of determining
the acceptability of an OIC.

Is the Service the sole or major creditor?

Would taxes be dischargeable in bankruptcy?

Does the offer amount equal or exceed what the Service can reasonably expect to recover from bankruptcy?

Are there other considerations, such as what could be collected on liabilities that would not be discharged, or what could
be collected from property outside of the bankruptcy, including third parties?

Note:

Under no circumstances will the Service accept less than would be recoverable from a Chapter 7 bankruptcy, unless special
circumstances exist. Absent special circumstances, the basis for acceptance of an offer where the RCP is adjusted based on
consideration of the amount recoverable in bankruptcy will be Doubt as to Collectibility. Refer to IRM 5.8.11 - Effective
Tax Administration for a discussion of special circumstances.

5.8.10.2.2.1
(09-27-2011)Consideration of a Potential Bankruptcy Filing on the Calculation of RCP in an OIC Investigation

The following information is provided to guide you in determining if consideration should be given to a potential bankruptcy
filing and in what situations involvement of an insolvency advisor or specialist is appropriate.

Note:

An offer should never be accepted solely on the basis of the taxpayer offering the amount collectible through a bankruptcy
proceeding without further investigation. However acceptance of an offer for less than reasonable collection potential (calculated
in accordance with IRM 5.8.5, Offer in Compromise - Financial Analysis) may be appropriate based on the facts of the case.

If ...

Then ...

Comments

The taxpayer/representative submits an offer and indicates it should be accepted for less than RCP because a bankruptcy proceeding
will be filed if the offer is not accepted.

Review the assessments to determine if any taxes may be dischargeable and conduct a review of financial statements and draft
bankruptcy schedules, if available, to determine the amount potentially collectible through the bankruptcy proceeding. Refer
to the additional guidance provided in this section to determine the potential reduction to future income value (FIV)

Depending on the date of the tax assessment and the type of taxes owing, certain taxes may be dischargeable. In limited instances,
an adjustment to FIV may be appropriate.

The assistance of the Insolvency Unit should be pursued if the guidance in IRM 5.8.10.2.2.2 is insufficient to make a reasonable
decision on a case and the UBA is $25,000 or more. If Insolvency is contacted for assistance; document any discussions and/or
calculations in the recommendation report and appropriate ICS/AOIC history. OIC employees should contact the Centralized Insolvency
Operation (CIO) to secure information on the insolvency employee who may be contacted for assistance based on the taxpayer's
geographic location. The CIO phone number is listed in the SERP “Who/Where” tables.

This section provides very general guidance in the determination of the amounts potentially recoverable in a bankruptcy proceeding.
The estimations used in this section are only meant to arrive at the amount reasonably expected to be collected from the taxpayer
as discussed in Policy Statement P-5-100.

Note:

This guidance is not meant to replace the specific information provided in IRM 5.9 - BANKRUPTCY AND OTHER INSOLVENCIES and
should Not be referred to in order to calculate amounts the Service would actually recover thru any insolvency proceeding.

Although the classification of a tax liability and the potential dischargeability is a complicated matter, the following general
rules may be used in determining RCP during an offer investigation where the potential for a bankruptcy filing exists. Although
not all inclusive, the determination of tax liabilities which may survive bankruptcy depends on whether the liabilities are
secured, the type of tax liability, and the age of the liability.

Secured - For purposes of this section, secured tax claims are those for which a notice of federal tax lien (NFTL) has been
filed or will be filed during the offer investigation to the extent of the equity to which the lien attaches. Any portion
of the liability that is not secured by equity in assets will be classified as a priority or general unsecured claim.

Note:

Certain "excluded"
property, such as an ERISA qualified retirement plan, may be secured via the statutory lien.

Priority - Generally, priority tax claims are those with return due dates of less than three years prior to the petition date,
income tax assessments made within 240 days before petition date, and income tax deficiencies that are unassessed but are
assessable prior to the petition date. Also, priority claims include all trust fund liabilities, both the trust fund portion
of employment taxes and the trust fund recovery penalty. Only the tax and related interest (not penalties) is entitled to
priority.

Nondischargeable- Priority tax claims are not dischargeable in bankruptcy. Other nondischargeable taxes include taxes for
which no return was filed; taxes filed late but within two years of the bankruptcy petition date, penalties related to a transaction
or event within two years of the petition date, fraud, and situations when the taxpayer has willfully evaded payment of tax..

Calculation of an acceptable offer amount –

The following guidance will assist in determining the taxpayer’s RCP in situations where the filing of a bankruptcy is a viable
option for the taxpayer.

The equity in any assets secured by a NFTL, including real or personal property, should be included in the RCP. This includes
situations where all taxes may be dischargeable in bankruptcy. The NFTL will secure the government’s ability to collect from
these assets, even if they are exempt.

Note:

Special circumstances and hardship issues should also be considered in determining whether an offer for less than RCP is acceptable.

The taxpayer’s FIV may be reduced below the normal calculation of FIV in accordance with IRM 5.8.5.23, Calculation of Future
Income, yet should not be reduced to less than the balance of nondischargeable tax liabilities, since they will remain owing
subsequent to the bankruptcy.

Example:

A taxpayer who owes $65,000.00 states they will be filing a Chapter 7 liquidating bankruptcy if their offer in compromise
is not accepted. The taxpayer has net equity (after consideration of any prior encumbrances, allowances, or appropriate percentage
reductions) in real property, vehicles, and retirement accounts equal to $ 25,000.00 and there are no special circumstances
or hardship issues to consider. A NFTL is filed on all outstanding tax liabilities. The taxpayer has the ability to pay $500.00
per month. The tax liabilities include $50,000.00 of dischargeable taxes and $15,000.00 of priority taxes which will survive
the bankruptcy. After all factors are considered, FIV may be reduced to approximate the $15,000.00 which will be collectible from an installment
agreement on the liabilities which will survive the bankruptcy. The net equity in all assets ($25,000.00) should also be included
in the RCP calculation for a minimum offer amount of $40,000.00.

Example:

The taxpayer has equity in assets equal to $25,000.00 which includes real property and retirement accounts. The taxpayer has
no future income ability and no ability to borrow against the $15,000.00 equity in their residence. Additionally, it is determined
the liquidation of the equity in the taxpayer's residence to pay the outstanding liabilitie(s) would render the taxpayer unable
to meet basic living expenses and the taxpayer will need their $10,000.00 retirement account to meet basic living expenses.
The tax liabilities include $50,000.00 of dischargeable taxes and $15,000.00 of priority taxes which will survive the bankruptcy.
Since the taxpayer has no future income ability and liquidation of the equity in the residence and retirement account would
render the taxpayer unable to meet basic living expenses, the taxpayer's offer in the amount of $2,500.00, which will be funded
by a loan from a relative would be appropriate based on the taxpayer's special circumstances.

Example:

All the tax liabilities are trust fund taxes and the taxpayer has stated they are going to file a Chapter 7 proceeding. Since
the taxes are not dischargeable, the taxpayer's possible bankruptcy should not affect the determination of an acceptable offer.

Example:

The tax liabilities are from timely filed individual tax returns which are all over three years old and have been assessed
for more than 240 days with an UBA of $50,000.00. Since the taxpayer owns no real property, it is possible the government
will receive a minimal amount in a Chapter 7 proceeding. Since the UBA is over $25,000.00, discussion with Insolvency may
be appropriate, if the taxpayer's offer appears reasonable, yet less than the RCP.

5.8.10.2.3
(09-27-2011)Acceptance of Offer in Compromise After Chapter 7 Bankruptcy

Only after a discharge has been granted or a dismissal has taken place, can an administrative OIC be considered by the Service
in a Chapter 7 proceeding. Once the discharge is entered, the Service will be able to determine which taxes are discharged
and will be able to make a determination of “Doubt as to Collectibility” under its administrative OIC procedures

For debtors discharged in Chapter 7, where the bankruptcy case is still pending, it is uncertain whether the Service would
still have a valid claim in bankruptcy if an OIC is accepted. Therefore, the amount acceptable should include the amount that
the Service can reasonably expect to recover from the bankruptcy in addition to what can be collected from the taxpayer on
non-discharged liabilities or from property outside the bankruptcy.

Refer to IRM 5.9.4.10, Offer in Compromise and Bankruptcy for discussion on the Service’s policy relative to specific bankruptcy
chapters.

IRM 5.9.4.10 (6) provides guidance on the handling of OIC payments prior to filing of a bankruptcy petition and IRM 5.9.4.10
(7) discusses payments subsequent to the petition date.

When a taxpayer files bankruptcy after an OIC is accepted, the Service may need to take specific actions to secure unpaid
offer funds or to secure payment of tax through the bankruptcy proceeding. (See IRM 5.9, Bankruptcy and Other Insolvencies,
for additional information.)

In accordance with the Bankruptcy Code, the offer should not be defaulted or payments solicited while the taxpayer is in bankruptcy.

When the Service becomes aware that a bankruptcy has been filed after the acceptance of an OIC:

If…

Then…

The offer funds have been paid in full

The bankruptcy filing has no effect on the accepted offer.

The offer funds have not been paid in full

Refer to IRM 5.9.4.10.1 Accepted but Not Completed Administrative OICs. If additional guidance is required, contact the Insolvency
Unit to determine necessary action to protect the Service’s interest in the bankruptcy proceeding.

5.8.10.3
(09-23-2008)Other Insolvency Cases

A copy of the court order or other evidence should accompany Form 656, Offer in Compromise.

The following should be secured in "Receiverships"
and other non-bankruptcy insolvencies:

A general statement of the circumstances which resulted in the receivership and the purpose of the receivership; that is,
whether the objective is liquidation of assets, conservation of assets, foreclosure of a mortgage or reorganization.

A copy of the petition for the appointment of a receiver and a copy of the court order appointing the receiver or trustee
can be used in lieu of a general statement, if the petition provides the information above.

Copies of all pertinent schedules filed with the court.

Consideration of an OIC frequently presents questions concerning the rights of the government to priority in the collection
of the tax claims over the claims of other creditors of the taxpayer.

The rights of other creditors are based on liens which may be recognized by state law, but because of the taxpayer's assignment
of assets for the benefit of other creditors, the provisions of 31 U.S.C. § 3713 apply.

When considering the offer:

Evaluate the rights of all creditors,

Evaluate all facts and circumstances relating to the various claims,

Verify all pertinent dates, such as the origin and filing of all claims and liens, and

Verify the steps which have been taken towards the enforcement of the claimant's alleged rights.

The following table provides information on potential options available to collect the liabilities.

If…

Then…

The priority rights of the United States are disregarded when the funds of the estate are disbursed

An assignee for the benefit of creditors, as well as an executor or administrator of a decedent's estate, may become personally
liable.

A corporation is the assignor and the tax liability sought to be compromised consists of withholding of Federal Insurance
Contribution Act (FICA) taxes, or taxes which the assignor might be required to withhold or collect from others and pay over
to the government

Consider the possibility of enforcing the TFRP provisions of the code.

When questions arise regarding the priority rights of the United States contact Area Counsel.

5.8.10.4
(09-23-2008)Death of Taxpayer

When the Service is notified of the death of the taxpayer who submitted an OIC that is currently under consideration, the
Service can no longer consider the OIC. A termination letter will be generated from AOIC and the offer should be closed with
the termination closure option.

Many times the OIC under consideration was submitted jointly by a husband and wife. In that situation, contact with the surviving
spouse should be made to determine whether there is a probate proceeding pending. See IRM 5.5, Decedent Estates and Estate
Taxes, and IRM 5.17.13.10, Decedents' Estates, for more information about decedent taxpayers and probate proceedings.

If…

Then…

There is a probate

Explain that consideration of the offer will be terminated and that another offer can be submitted once the probate has been
concluded. Contact Technical Support and advise of the probate proceeding and the tax liability due. Terminate consideration
of the offer.

There will be no probate proceeding and the surviving spouse does not want us to continue considering the OIC

Terminate consideration of the joint offer due to the death of the spouse.

There will be no probate proceeding, the surviving spouse does want us to continue considering the OIC, and the surviving
spouse is named as executor by a will, or if there is no will, the spouse is named as the personal representative by the probate
court

Even if the surviving spouse is named as the executor in a will, the spouse may need approval from the probate court, which
determines the validity of wills, prior to acting on behalf of the decedent spouse. Consult Area Counsel. Once the surviving spouse is authorized to act on behalf of the decedent by the probate court, obtain a copy of the will and/or
court order, and an amended OIC reflecting the spouse as deceased and continue consideration of the joint offer.

There is no probate proceeding and the surviving spouse wants the Service to continue consideration of the OIC; however, the
spouse was not appointed executor by a will (with approval by the probate court), or if there is no will, the surviving spouse
is not named as the personal representative by the probate court

Since the surviving spouse does not have the authority to compromise the liability of the deceased taxpayer, secure an amended
offer removing the deceased spouse's name and continue consideration of an offer for the surviving spouse's obligation only.

5.8.10.5
(09-27-2011)Transferee

When an OIC investigation reveals the potential for a transferee situation, the burden of proof of transferee liability rests
with the government.

Note:

If it is determined that a transferee investigation should be initiated, it will not be conducted by the Offer Investigator.
Instead, it will be conducted by a field RO by generating an Other Investigation. Other Investigations referred per these instructions should be considered high risk cases, code 100, and processed accordingly.

If…

Then…

A potential transferee is discovered during an OIC investigation

Conduct an investigation to determine if a transferee exists.

A transferee liability exits

Determine the amount the Service may reasonably expect to collect from the transferee.

Attempt to negotiate an acceptable OIC amount with the transferee value included in the RCP calculation.

There is a question whether a transferee liability may be established and sustained

Determine the value of the transferee based on the degree of doubt regarding the transferee being sustained.

Attempt to negotiate an acceptable offer amount including this value in the RCP.

Note:

Flexibility should be exercised during negotiations if the transferee assessment will not be pursued.

During the investigation of an OIC the OE/OS determines that a transferee assessment should be pursued and negotiations have
not resulted in an acceptable offer amount

Attempt to secure a withdrawal letter from the taxpayer.

If the taxpayer does not withdraw the OIC, prepare the rejection closing documents and follow procedures for recommending
rejection with appeal rights. Include the value of the transferee in the RCP.

Note:

Thorough documentation of the basis for including the value of a transferred asset in the RCP is required. A discussion on
the documents reviewed in making the determination that transferee issues exist should be included in the rejection narrative
as well as the case history.

Prepare an Other Investigation to be issued to a field RO to investigate the transferee issue.

5.8.10.6
(09-27-2011)Discharge and Subordination Requests

An application for discharge or subordination may be received in conjunction with an offer in compromise (OIC) in a number
of different scenarios including:

When a taxpayer simultaneously submits an application for discharge/subordination and a Form 656 - Offer in Compromise to
Advisory.

Note:

If the taxpayer wants the proceeds from their discharge/subordination to be applied to their initial Tax Increase Prevention
and Reconciliation Act of 2005 (TIPRA) payment refer to the guidance in (2) of this section

, or

When a taxpayer requests a discharge/subordination while an offer is pending and the request is approved, or

When a taxpayer submits a discharge or subordination after an OIC has been accepted, but before all the payment terms have
been met

Note:

Proceeds from the discharge/subordination may not be applied as the application fee

.

Note:

In these cases, the discharge or subordination investigation will not be conducted by the OE/OS. Instead, it must be conducted
by the appropriate Technical Support by generating an Other Investigation. Other Investigations referred per these instructions should be considered high risk cases, code 100, and processed accordingly.

Requests for discharge or subordination received with the Form 656 or while an OIC is pending are to be handled as follows:

If…

Then…

The taxpayer simultaneously submits an application for discharge/subordination and an OIC to Advisory.

The advisor will:

Date stamp the offer in compromise as being received

Prepare Form 657, Offer in Compromise/Revenue Officer Report. The Advisor will write in red ink at the top of the Form – "Discharge/Subordination
Request"
. This will alert COIC that this is not a solely to delay issue.

Follow IRM 5.8.2.2(3) and forward a copy of the application for discharge/subordination, Form 657, and all offer documents
(Form 656, Form 433A/B, support documents, and payments, if applicable) to the appropriate COIC site via overnight mail.

Note:

Payments made to the Service in order to obtain a certificate of discharge may be applied as the initial TIPRA payment only
if the payment is received at the time of the offer submission.

Note:

If the offer is submitted without the required TIPRA payment and the taxpayer now wants to begin the paperwork for a discharge,
the offer should be treated as a not processable return.

Because TIPRA requires that we have 2 years from the IRS received date to make a determination or the offer will automatically
be accepted, the advisor will work the application for discharge or subordination expeditiously.

The COIC site process examiner will make a processability determination and process the offer as described in IRM 5.8.3, Offer
in Compromise - Processability. However, do not treat these offers as solely to delay collection as described in IRM 5.8.3.8,
Processing Form 657, Offer in Compromise/Revenue Officer Report. The advisor is only using the Form 657 as a way to identify
and bring to the attention of COIC that there is an application of discharge/subordination currently being investigated.

Once the offer has been deemed processable, COIC will immediately transfer the offer to the Area and send all of the appropriate
documents. Prior to transfer, the COIC site will document the AOIC history with the advisor’s name and phone number.

If the offer is not processable, then the process examiner will promptly notify the advisor.

Throughout this process, it is vital there be communication between the site, Advisory, and the field offer specialist.

The taxpayer requests a discharge/subordination while an offer is pending and the request is approved.

The advisor will:

Advise the taxpayer that proceeds from the discharge or subordination will be applied to the OIC, if accepted.

Advise the taxpayer if the OIC is not accepted, the proceeds will be applied to the tax liability.

Before delivering the certificate of discharge or subordination, the advisor will require the taxpayer to execute a Form 3040,
Authorization to Apply Offer in Compromise Deposit to Liability. The word "irrevocable"
must be written in the signature block of the Form 3040 or the taxpayer should check the box on Form 3040 and place their
initials next to that box.

The advisor will submit a copy of the Form 3040 to the OE/OS investigating the offer and will retain the signed Form 3040
in the case file for use in the event the OIC is returned, withdrawn, or rejected.

Note:

A TIPRA payment may not be used to offset the amount required from the taxpayer to obtain the certificate of discharge/subordination.
Refer to the prior discussion if the OIC and the payment to receive a discharge/subordination are submitted simultaneously.

Requests for discharge or subordination received after an OIC has been accepted, but before all the payment terms have been
met, should be handled as follows:

If…

Then…

The taxpayer does not intend to apply the proceeds received from the discharge or subordination to the OIC amount

Deny the discharge or subordination request.

The taxpayer does intend to apply the proceeds toward the OIC amount

Request an investigation of the discharge or subordination from Technical Support and then coordinate with Technical Support
to apply the proceeds to the OIC amount.

Note:

The government is bound by the payment terms of an accepted OIC and cannot require payment of the offer amount in different
terms, other than stated in the OIC agreement.

5.8.10.7
(09-23-2008)Effect of Previous Offers on Collection Statute

Over the years there have been numerous changes in the law and IRS procedures relating to the extension of the statutory period
for collection while OIC's are being considered. The information provided in this section will assist in determining the correct
CSED, which can impact the number of required payments in periodic payment situations and in the determination of future income
value.

For OIC's pending prior to 1/1/2000, the taxpayer executed a waiver of the statutory period for collection, extending the
collection statute for the period the OIC was under consideration and for an additional one year. For OIC's accepted prior
to 1/1/2000 this waiver of the statutory period for collection also included the period of time the terms of an accepted OIC
were still in effect.

Note:

RRA 98 imposed a limitation for OIC's subject to a waiver of collection statute. The waiver cannot extend the CSED beyond
either 12/31/2002, or the original CSED, whichever is later.

For OIC's submitted or pending after 12/31/1999, the statutory period for collection was suspended, by operation of law, while
the OIC was pending, for 30 calendar days following rejection of an OIC, and for the period the rejection was being considered
in Appeals. This suspension of the collection statute is effective through 12/20/2000.

For OIC's that were pending prior to 1/1/2000 and were still pending on or after 1/1/2000, the collection statute is extended
by both waiver periods and by the suspension period (See paragraphs 2 and 3 above).

Note:

The limitation on the waiver of collection statute applies to these OIC periods.

The Community Renewal Tax Relief Act of 2000 was signed into law on 12/21/2000. This act eliminated the suspension of the
statutory period for collection, effective on the day of enactment (12/21/2000).

The Job Creation and Workers Assistance Act was signed into law March 9, 2002. This law reinstated the suspension of the statutory
period for collection, by operation of law, while the OIC is pending, for 30 calendar days following rejection of an OIC,
and for the period the rejection is being considered in Appeals.

Cases may be encountered where prior rules were in effect. The following chart shows the changes that have occurred in this
area.

If the offer has a…

and was…

then…

Pending date of 1/1/2000 or later

Accepted prior to 12/21/2000

The CSED is extended from the pending date (TC 480) until the acceptance date (TC 781/788).

Pending date of 1/1/2000 or later

Accepted between 12/21/2000 and 3/8/2002

The CSED is only extended from the pending date (TC 480) through 12/20/2000.

Pending date of 1/1/2000 or later

Accepted after 3/8/2002

The CSED is extended from the pending date (TC 480) through 12/20/2000 and if the offer was still pending, it was also extended
from 3/9/02 until the date of acceptance (TC 780).

Pending date of 1/1/2000 or later

Rejected and taxpayer does not appeal

The CSED is extended from the pending date (TC 480) until 30 calendar days after the rejection letter is issued (TC 481),
excluding any portion of that period which falls between 12/21/2000 and 3/8/2002.

Note:

As of 2/2/2004, the AOIC system automatically adds 30 days to the date of the TC 481 on rejected not Appealed offer closures
prior to transmission to master file. Appealed rejections carry the Appeals rejection date.

Pending date of 1/1/2000 or later

Rejected and sustained in Appeals

The CSED is extended from the pending date (TC 480) until the date that Appeals issues a decision letter (TC 481), excluding
any portion of that period which falls between 12/21/2000 and 3/8/2002.

Pending date prior to 1/1/2000

Accepted prior to 1/1/2000

The CSED is extended from the pending date (TC 480) until all payment installments are made (TC 780) plus 1 year. The CSED
cannot be extended beyond 12/31/2002 or the original CSED date, whichever is later.

Pending date prior to 1/1/2000

Accepted after 12/31/1999 but prior to 12/21/2000

The CSED is extended from the pending date (TC 480) through 12/31/99 plus 1 year. The CSED cannot be extended beyond 12/31/2002
or the original CSED date, whichever is later. If the offer was still pending on 1/1/2000, the CSED would also be extended
from that date until the date of acceptance (TC 780).

Pending date prior to 1/1/2000

Accepted after 12/20/2000

The CSED is extended from the pending date (TC 480) through 12/31/99 plus 1 year. The CSED cannot be extended beyond 12/31/2002
or the original CSED date, whichever is later. In addition, the CSED is extended from 1/1/2000 through 12/20/2000. However,
the CSED would not be extended from 12/21/2000 until 3/8/2002. If the offer was still pending on 3/9/2002 the CSED would also
be extended from that date until it was accepted (TC 780).

Pending date prior to 1/1/2000

Rejected prior to 1/1/2000

The CSED is extended from the pending date (TC 480) until the rejection date (TC 481) plus 1 year. The CSED cannot be extended
beyond 12/31/2002 or the original CSED date, whichever is later.

Pending date prior to 1/1/2000

Rejected 1/1/2000 or later

The CSED is extended from the pending date (TC 480) until 12/31/1999 plus one year. If the CSED was originally going to expire
after 12/31/2002, then the waiver language contained on the submitted Form 656 has no effect. Rather, in this instance, the
CSED is extended from 1/1/2000 until 12/20/2000 or the rejection date (TC 481) plus 30 calendar days, whichever is earlier.
If the offer is still pending, the CSED is again extended from 3/9/2002 until the rejection date (TC 481) plus 30 calendar
days.

If only one party to a joint assessment files an OIC, then the statute is suspended just for that person. The appropriate
CSED suspension code must be input on IDRS to identify the specific taxpayer for which the offer applies. They are described
below.

A taxpayer submitting an offer in compromise agrees to the extension of the statute of limitations for assessment. The extension
allows the Service the opportunity to evaluate the terms of an offer without the assessment statute expiring in the meantime.

An offer is considered pending or “being reviewed” when an authorized Service official signs the Form 656 up until the date
a determination is made. The TC 480 date is the date the offer was signed by an authorized Service official and is therefore
the date the pending period begins.

For an offer that has been accepted, the assessment statute is extended for the time the offer is pending up until the date
the Service acknowledges acceptance of the offer in writing.

For an offer that has been rejected, returned (processable), terminated or withdrawn, the amount of any federal tax due for
a tax period included on the offer may be assessed on the date by which any debt must currently be assessed plus the period
of time the offer is pending plus one year.

Note:

The appropriate calculation of the assessment statute is dependent on which revision of Form 656 the offer was submitted,
refer to the table in paragraph (6) of this section which discusses the impact the submission of an offer has on the assessment
statute expiration date based on the form submitted and the manner in which the offer was closed.

The filing of an offer in compromise does not extend the assessment statute for the purpose of assessing the trust fund recovery
penalty against anyone other than the taxpayer filing the offer.

The following charts illustrate the period of time the assessment statute is extended as determined by the revision date of
the Offer in Compromise Form 656:

ASED extension when offer submitted on Form 656 (Rev. March 2011) or later

OIC does not have any impact on calculation of the period of time for assessment which has otherwise expired.

TC 480 posted before expiration of the ASED and the TC 480 is reversed with a TC 481 rejection or return of the taxpayer's
offer.

ASED is extended from date of TC 480 to date of TC 481, plus one additional year.

TC 480 posted before expiration of the ASED and the TC 480 is reversed with a TC 482 withdrawal of the taxpayer's offer.

ASED is extended from date of TC 480 to date of TC 482, plus one additional year.

TC 480 posted before expiration of the ASED and the TC 480 is reversed with a TC 483.

ASED is not extended since the TC 483 is a reversing transaction to indicate the TC 480 was posted erroneously or returned
to the taxpayer as non-processable.

TC 480 posted before expiration of the ASED and the TC 480 is reversed with a TC 780 (acceptance).

ASED is extended from date of TC 480 to date of TC 780.

EXAMPLE: An offer accepted for processing (TC 480 date) on April 1, 2011 is rejected (TC 481 date) on July 1, 2011. Prior to submission
of the offer the earliest ASED was May 10, 2011. The ASED is extended for 91 days while the offer was pending, plus an additional
year (365 days) for a total of 456 days which is added to the ASED of each tax period listed on the offer. The new ASED on
the earliest period is August 8, 2012.

ASED extension when offer submitted on Form 656 Revision Dates May 2001 - March 2009

OIC does not have any impact on calculation of the period of time for assessment which has otherwise expired.

TC 480 posted before expiration of the ASED and the TC 480 is reversed with a TC 481 rejection of the taxpayer's offer.

ASED is extended from date of TC 480 to date of TC 481. The ASED will expire no sooner than one year after rejection of the
taxpayer's offer.

TC 480 posted before expiration of the ASED and the TC 480 is reversed with a TC 482 or a TC 481 based on a processable return
of the taxpayer's offer.

ASED is extended from date of TC 480 to date of TC 481/482.

TC 480 posted before expiration of the ASED and the TC 480 is reversed with a TC 483.

ASED is not extended since the TC 483 is a reversing transaction to indicate the TC 480 was posted erroneously or returned
to the taxpayer as non-processable.

TC 480 posted before expiration of the ASED and the TC 480 is reversed with a TC 780 (acceptance).

ASED is extended from date of TC 480 to date of TC 780.

EXAMPLE (1): An offer accepted for processing (TC 480 date) on March 1, 2009 is rejected (TC 481 date) on September 1, 2009. Prior to
submission of the offer the earliest ASED was March 10, 2010. Since the ASED is suspended for 184 days while the offer was
pending, an additional 184 days is added to the ASED of each tax period listed on the offer. The new ASED on the earliest
period is September 10, 2010.EXAMPLE (2): The same TC 480 and 481 dates as the previous example, yet the earliest ASED prior to the offer submission was February 1,
2010. Since the additional 184 days would only extend the ASED to August 4, 2010, additional time is added to extend the ASED
the one year period provided for on the Form 656, the new ASED is September 1, 2010.EXAMPLE (3): The taxpayer in example 2, then submits a new offer which has a TC 480 date of August 1, 2010, which is rejected with a TC
481 date of November 10, 2010. The ASED would be suspended for 101 days, yet since the 101 days would only extend the ASED
to December 11, 2010 additional time is added to extend the ASED the one year period provided for on the Form 656, the new
ASED would be November 10, 2011.

Note:

In Example 3, the extension of the ASED does not include one additional year for each offer submitted, yet if the offer was
submitted on Form 656 with a revision date May 2001 through March 2009, inclusive, the Service is provided at least one year
from the date the offer is closed to assess additional tax on any tax period included in the offer.

5.8.10.9
(09-27-2011)Indicators of Potential Practitioner Misconduct

During the verification of financial statements relating to the OIC, employees should always be aware of any indications that
a practitioner violated the duties and restrictions relating to practice before the IRS as described in Treasury Department
Circular No. 230 (Circular 230) "Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents,
Enrolled Actuaries, Enrolled Retirement Plan Agents, and Appraisers Before the Internal Revenue Service"
(Revised 4/2008). Pertinent Sections of Circular 230 may include, but are not limited to, Sections 10.20, 10.21, 10.22,
10.23, 10.24 and 10.30. Incompetence and disreputable conduct is described in Section 10.51. Some examples of those indicators
are:

Failure to exercise due diligence. This may be conduct where the practitioner ignored certain known facts or failed to make
reasonable inquiries to ascertain the reasonableness or correctness of certain oral or written representations made by his/her
client. A practitioner has a duty to make reasonable inquiries to determine the correctness of documentation they prepare
or assist in the preparation thereof relating to a submission to the IRS.

Deceptive advertising with respect to offers (such as unqualified promises of settlement, or "pennies on the dollar"
).

Section 822 of the American Jobs Creation Act of 2004 expanded the sanctions OPR may impose on practitioners to include the
imposition of a monetary penalty. If the practitioner is acting on behalf of an employer or other entity, OPR may impose
a monetary penalty on the employer, firm or other entity, in addition to the practitioner, if it knew, or reasonably should
have known, of the conduct.

A referral should also be made if the employee becomes aware that a suspended or disbarred practitioner is practicing or attempting
to practice before the IRS, or when it is noted that an unenrolled return preparer has been added to an otherwise valid Form
2848, Power of Attorney and Declaration of Representative, to attempt to have this person represent the taxpayer before the
IRS during the course of the offer investigation.

Note:

The referral process is required by Section § 10.53(a) and 10.53(b) of Circular No. 230.

5.8.10.9.1
(09-27-2011)The Role of the Office of Professional Responsibility

Under the authority provided by 31 U.S.C. § 330 and 31 CFR § 10, which is published as Treasury Department Circular No. 230 "Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents,
Enrolled Actuaries, and Appraisers before the Internal Revenue Service"
(Revised 4/2008), OPR renders decisions on applications for enrollment to practice, makes inquiries into matters under its
jurisdiction, and institutes disciplinary proceedings against tax practitioners who are found to have violated any part of
Circular No. 230.

5.8.10.9.2
(09-27-2011)Examples of Tax Practitioner Misconduct in the Offer in Compromise Program

A pattern of inappropriate conduct is a factor that the OPR will consider in determining whether sufficient evidence exists
to suggest a willful violation of Circular 230.

Below are some indicators of misconduct by practitioners.

Example #1 — Establishing a pattern on several Offer in Compromise investigations to influence the case disposition or Service employee
to obtain the desired results by:

Using abusive language

Threatening claims of misconduct (e.g., Section 1203 of the RRA)

Making false claims of misconduct

Threatening employee with personal legal action/litigation

Verbal/Physical threats or assaults

Offering a bribe (e.g., offering gifts or other things of value)

Note:

Verbal and/or physical threats/assaults should be referred directly to the local TIGTA office or by calling the TIGTA National
Hotline at 1–800–366–4484 or 1–800–589–3718 after hours.

Example # 2 — Establishing a pattern on several OIC cases in which investigations are delayed by the practitioner performing one or several
of the following actions:

Missing appointments

Canceling appointments at the last moment with no good cause provided

Agreeing to provide requested documentation and/or information and then refusing to follow through, hindering the ability
of the employee to complete the investigation of the offer

Note:

IRM 1.25.1.3, Referral to the Office of Professional Responsibility provides that a referral must clearly document all case
actions leading to the request for information/documents/substantiation, and the practitioner's failure to comply. In instances
of unreasonable delay on the part of a practitioner, by-pass procedures should first be initiated prior to a referral to OPR.
This set of facts may also support a referral under Section 10.22 (Diligence as to accuracy) and Section 10.23 (Prompt disposition
of pending matters) of Circular 230. In the event that a practitioner refused to provide documentation on grounds of privilege,
the Office of Chief Counsel should be consulted.

Example #3 — Establishing a pattern on several offer submissions, which could include significant omissions, or improper or unsubstantiated
discounts on a number of assets. The information provided must be shown to be materially misrepresented, not merely a simple
error. The omissions or material misrepresentations could include, but are not limited to, the following:

Assets are omitted

Listed assets are undervalued

Understating the taxpayer's income

Over stating the taxpayer's expenses

CIS reflects a large number of claimed dependents

CIS reflects similar dollar amounts in both checking and savings accounts

CIS reflects no available credit, including credit cards

CIS reflects omissions of assets

CIS shows similar listings for monthly income and expenses (e.g. same low wages, same child care expenses)

The badges of practitioner misconduct may also be indicators of potential fraud. (Refer to IRM 5.8.10.10) The inappropriate
misconduct should be discussed with your Fraud Technical Advisor (FTA) if appropriate. If a decision is made to refer the
practitioner to TIGTA and/or the Fraud program for potential criminal sanctions, these actions must be clearly documented
in the OPR referral.

5.8.10.9.3
(09-27-2011)Referring Tax Practitioner Misconduct to the Office of Professional Responsibility

Employees should be alert to the patterns and/or trends of inappropriate conduct as discussed in IRM 5.8.10.9.2, Examples
of Tax Practitioner Misconduct in the Offer in Compromise Program. When patterns and/or trends are identified through OIC's
submitted by a tax practitioner, or when reported to an employee by any other person other than an officer or employee of
the Service, the employee should complete and submit Form 8484, Report of Suspected Practitioner Misconduct and Report of
Appraiser Penalty, to the OPR, and refer the suspected practitioner misconduct for appropriate disciplinary action.

Circular No. 230, Section 10.53 states a referral should include all of the basic information, as well as the reasons supporting
the Service employee's belief that the information submitted by the practitioner was below the expected standard. The referral
should contain the following specific information: the tax practitioner's name, address, telephone number, designation (i.e.,
attorney, certified public accountant, enrolled agent, enrolled actuary, etc.), a detailed description of the allegations,
and any documents that support those allegations.

Mail, fax, or E-mail the Form 8484, the accompanying narrative, and any other supporting documents to:

A copy of the referral should also be provided to the National Offer in Compromise Program Manager.

Additional information about reporting suspected practitioner misconduct may be found on the OPR Intranet Website at http://nhq.no.irs.gov/OPR/. OPR has established an E-mail address to answer questions about Circular No. 230 issues at OPR@irs.gov.

5.8.10.9.4
(09-27-2011)Preparation of Form 8484, Report of Suspected Practitioner Misconduct and Report of Appraiser Penalty to the Office of Professional
Responsibility (OPR)

If available, attach a copy of the Form 2848, Power of Attorney and Declaration of Representative, or an IDRS CAF printout
to the Form 8484. If neither a copy of the Form 2848 nor a CAF printout is available, but the employee has personal knowledge
of the practice, provide the following statement, "I dealt with this practitioner during (year) regarding a collection matter.
The Form 2848 was not put on the CAF and I do not have access to the closed case file."
OPR must be able to accurately identify and locate the tax practitioner in order to process the referral and establish
proof of practice before the Internal Revenue Service.

Part C – Explanation of Suspected Misconduct

Complete and attach a narrative to the Form 8484. The narrative should be detailed enough to allow the OPR to give the practitioner
fair notice of the suspected misconduct. It should list all significant events that illustrate the inappropriate conduct in
chronological order, explain how the conduct impacts on the administration of the tax laws, as well as any other supporting
information that will establish a pattern of misconduct. It should include appropriate quotations from the case history that
would support the alleged misconduct. If applicable, hand-written material should be transcribed. The narrative should be
specific and should include: who, what, when, where, and why.

Part D – Contact Person and Address

The contact person is not necessarily the person with first-hand knowledge of the suspected misconduct. Rather, the contact
person may be an Area employee responsible for collecting misconduct reports and submitting them to the OPR. OPR will direct
questions concerning the referral to the contact person.

Part E – Management Approval

While OPR does not require any particular level of management approval, field Group Managers or Offer Examiner Unit Managers
(COIC) should review and approve referrals made by OIC employees before documents are sent to OPR.

Part F – Office of Professional Responsibility (OPR) Acknowledgement of Report

Upon receiving the Form 8484 and the corresponding narrative, OPR will complete Part F and return a copy to the contact person.

5.8.10.10
(09-27-2011)Indicators of Taxpayer Fraud

The following are potential fraud warning signs most identifiable during an interview:

Failing to keep proper books and records in a business or profession.

No records, poorly kept records, or attempts to falsify or alter records.

Destroying books and records without plausible explanation or refusal to make certain records available.

Extent of taxpayer's control of sales and receipts and the apparent unwillingness to delegate this function to employees.

Engaging in illegal activities.

Personal living standard and asset acquisition is inconsistent with reported income.

Indications that valuable assets belonging to the taxpayer are being acquired and held in the name of others.

Self-serving statements with no documented proof.

Repeated procrastination on the part of the taxpayer in making and keeping appointments.

Hasty agreement to adjust and undue concern about immediate closing of the case may indicate a more thorough examination may
be necessary.

The following are potential fraud warning signs most identifiable during verification of the financial statement:

Uncooperative attitude displayed by:

Not providing requested information

Refusal to make certain records available

Not furnishing adequate explanations for discrepancies or questionable items

Trying to conceal a pertinent fact or record.

Failing to deposit all receipts to the business account.

Use of nominees or false names.

Unusual depletion of assets shortly before filing an offer.

Inflated salaries, payment of bonuses or cash withdrawals by officers, directors, shareholders, or other insiders.

Transfers of property to insiders, shareholders, or relatives shortly before filing the offer.

Payoff of loans to directors, officers, shareholders, relatives, or other insiders shortly before filing of the offer.

Complicated corporate structures and relationships.

Undervaluing of assets.

Overstatement of liabilities.

The fraud indicators below can fall into any of the categories in paragraphs (1) and (2) above:

Making false, misleading, and inconsistent statements.

Using currency instead of bank accounts or making large expenditures in currency.

Refer to IRM 5.8.4.17 - Open Criminal Investigations relative to the appropriate actions if the taxpayer is involved in an
open criminal investigation.

5.8.10.11
(09-27-2011)Docketed Tax Court Cases

Tax Court cases generally are handled by Area Counsel. The IRS has the authority to accept offers where the liability is
the subject of a pending Tax Court Case. Unless the case is under Appeals jurisdiction, Doubt as to Collectibility (DATC)
offers submitted while a Tax Court case is pending are under Collection jurisdiction.

Any request for a financial review from Collection by Area Counsel in which settlement authority is being utilized outside
the offer process should be provided to a Revenue Officer in Collection Field function and worked as an Other Investigation
(OI).

5.8.10.11.1
(09-27-2011)Docketed Cases Involving Pending Liabilities

These procedures provide guidance in situations where the taxpayer's liability has not been determined.

Responsibility of Counsel:

Regardless of whether the written OIC is complete, immediately send it and any attachments or payments to the appropriate
COIC site with the "Expedited Processing Required"
transmittal (Exhibit 5.8.10-1) for a processability determination. The correct COIC site is based on the location (state)
of the taxpayer and can be found on the OIC portion of the "My SB/SE-Collection website."
Counsel will overnight it to the appropriate COIC site to ensure the 24-hour period for deposit is met.

A stipulation of the full amount of the deficiencies and penalties (those determined in the statutory notice or those redetermined
on the merits by agreement of the parties) should be obtained and may be held in escrow by Counsel, see CCDM 35.8.6.2.1. Additionally,
a signed Form 3040, Authorization to Apply Offer in Compromise Deposit to Liability, should be secured, and the taxpayer should
be advised, if the offer is not accepted the TIPRA payment is non-refundable and will be applied to any current outstanding
liability or liability determined in the court proceedings.

Counsel will advise the Offer Specialist of any new developments on the case that may impact the investigation and/or the
overall decision.

Responsibilities of COIC:

Review for processability criteria.

If the offer is not processable, contact the Counsel Attorney and explain why the offer cannot be processed.

Note:

If the offer is a pending liability case, the modules should be added to AOIC showing 0.00 liability.

If the offer is processable, follow current IRM procedures, including loading the offer on AOIC. Treat the offer as being
received on the date that Counsel received it.

If the offer is a pending liability case, the TIPRA payment and application fee (if applicable) should be posted as a deposit.

Immediately forward the case (including the "Expedite"
transmittal) to the appropriate drop point.

Document the AOIC history.

The type of pending Tax Court Case determines whether the OIC is subject to the 24 month, "deemed accepted"
rule of IRC §7122(f). If the proceeding is a deficiency case, the 24 month rule does not apply because the liability is
in dispute.

Responsibility of the Field Group:

Upon receipt of the offer in the appropriate Drop Point, assign the case within 5 days of receipt.

Upon assignment, the Offer Specialist (OS) should contact the Attorney indicated on the transmittal and provide their name
and contact phone number.

The OS should complete the investigation within Counsel’s (the Court’s) required timeframe or contact the attorney to discuss
any anticipated delays.

If the investigation results in a decision to recommend acceptance of the offer, discuss the findings with the Counsel Attorney
before communicating the decision to the taxpayer or their representative.

If the investigation indicates that the case could be an acceptance, but would require an increase in the offer amount, the
OS should issue the preliminary acceptance letter requesting the increased amount. If the TP agrees to the increased amount,
contact the Counsel Attorney prior to issuing the acceptance letter. If the TP does not agree to the increased offer amount,
contact the Counsel Attorney to discuss the next appropriate action.

If the decision is other than acceptance, discuss with the Counsel Attorney the issuance of an appropriate final determination
letter.

If it is determined, with Counsel concurrence, a rejection letter as discussed in 26 CFR 301.7122-1 (f), should be provided,
IRM procedures requiring review by the IAR in accordance with IRC §7122 (e) will be followed.

5.8.10.11.2
(09-27-2011)Docketed Collection Due Process (CDP) Cases

These procedures provide guidance in situations where Area Counsel requests consideration of an offer by employees of an OIC
function.

Responsibility of Counsel

Regardless of whether the written OIC is complete, immediately send it and any attachments or payments to the appropriate
COIC site with the "Expedited Processing Required"
transmittal (Exhibit 5.8.10-1) for a processability determination. The correct COIC site is based on the location (state)
of the taxpayer and can be found on the OIC portion of the "My SB/SE-Collection website."
Counsel will overnight it to the appropriate COIC site to ensure the 24-hour period for deposit is met.

Counsel will advise the Offer Specialist of any new developments on the case that may impact the investigation and/or the
overall decision.

Responsibilities of COIC:

Review for processability criteria.

If the offer is not processable, contact the Counsel Attorney and explain why the offer cannot be processed.

If the offer is processable, follow current IRM procedures, including loading the offer on AOIC. Treat the offer as being
received on the date that Counsel received it.

The TIPRA payment and application fee (if applicable) should be posted to the taxpayers' account.

Immediately forward the case (including the "Expedite"
transmittal) to the appropriate drop point.

Document the AOIC history.

If the taxpayer raises any tax liability in a CDP case in Tax Court, the 24 month rule applies, but the 24 month period is
suspended for the period in which the tax liability is disputed in court.

Responsibility of the Field Group:

Upon receipt of the offer in the appropriate Drop Point, assign the case within 5 days of receipt.

Upon assignment, the Offer Specialist (OS) should contact the Attorney indicated on the transmittal and provide their name
and contact phone number.

The OS should complete the investigation within Counsel’s (the Court’s) required timeframe or contact the attorney to discuss
any anticipated delays.

If the investigation results in a decision to recommend acceptance of the offer, discuss the findings with the Counsel Attorney
before communicating the decision to the taxpayer or their representative.

If the investigation indicates that the case could be an acceptance, but would require an increase in the offer amount, the
OS should contact the Counsel Attorney to discuss the potentially acceptable amount and next appropriate action.

If the TP agrees to the amount deemed acceptable, discuss with the Counsel Attorney the timing of the offer acceptance letter
in relation to the court proceedings.

If the TP does not agree to the increased offer amount, the offer should be closed as a processable return based on the current
litigation

A taxpayer may submit an offer in compromise (OIC) which provides a frivolous or groundless position as the reason the OIC
should be accepted. In these instances, the OIC should be returned under delay of collection criteria in accordance with IRM
5.8.4.18, Offer Submitted Solely to Delay Collection, or may be treated as though the offer was never submitted in accordance
with IRC 7122(f)[g].

Note:

If the submission involves a practitioner refer to IRM 5.8.10.9 relative to potential practitioner misconduct.

A determination to treat the OIC as though it was never submitted should be based on the specific facts of the case.

Note:

The collection statute expiration date will not be suspended and any application fee and offer payment will be required to
be returned if the offer is treated as though it was never submitted.

The taxpayer's basis for submitting the offer is deemed frivolous if it includes a tax argument discussed in Internal Revenue
Service Notice 2010-33 which lists specific tax arguments determined to be frivolous, including but not limited to, federal
income taxes are unconstitutional, enforcement of the tax laws invades a taxpayer's privacy under the Fourth Amendment, or
the Fifth Amendment privilege against self-incrimination grants taxpayers the right not to file returns or the right to withhold
all financial information from the Service.

If the taxpayer includes any of the positions listed in Notice 2010-33 as the reason an offer in compromise should be accepted,
then the assertion of a penalty for a frivolous submission under IRC 6702(b) may be appropriate. IRC 6702(b) provides for
a penalty in situations when there is a frivolous offer submission or an offer submission in which the taxpayer has demonstrated
a desire to delay or impede the administration of federal tax laws.

The recommendation to assert the penalty under IRC 6702(b) must be based on the facts and circumstances of the particular
case. In egregious situations where the assertion of the penalty is deemed appropriate, prior to returning the offer under
solely to delay criteria in accordance with IRM 5.8.4.18.1, Procedures for Return of Offers Submitted Solely to Delay Collection,
or determining the offer will be treated as never being submitted, refer to IRM 5.8.10.12.1, Request for Penalty Assertion
under IRC 6702(b) relative to the actions necessary to assert a penalty under IRC 6702(b).

Note:

Although these types of submissions will most generally be under Doubt as to Liability (DATL) and processed by the DATL unit,
in rare instances an offer submitted under Doubt as to Collectibility or Effective Tax Administration or which include a trust
fund recovery penalty assessment may include a frivolous argument.

If the taxpayer files an offer in compromise (OIC) that states the OIC should be accepted based on a frivolous position or
reflects a desire to delay or impede the administration of federal tax laws and it is determined assertion of the penalty
under IRC section 6702(b) is applicable; the taxpayer should be given 30 days to withdraw or amend their OIC prior to the
assertion of the penalty.

The opportunity to withdraw or amend the offer should be in writing and included in correspondence that advises the taxpayer
that actions to avoid the $5,000 IRC 6702(b) penalty are either to withdraw the offer or amend the offer so it only includes
a valid reason for acceptance based on existing law.

If the taxpayer fails to withdraw the offer, then review the documentation to verify that the offer includes either a frivolous
position or a desire to delay position.

Once the criteria for penalty assessment have been verified, the collection employee will take the necessary steps to have
the penalty assessed by preparing a Form 3210, Document Transmittal addressed to Ogden Compliance Services, Attn: FRP, M/S
4450, Sr. Technical Advisor, 1973 N. Rulon White Blvd, Ogden, Utah, 84404.The following information should be listed on the Form 3210:

TIN and Name Control

MFT 55 for IMF or MFT 13 for BMF and Period (if multiple periods, use the latest period on the hearing request)

Penalty Reference Code 543 which is used for IRC section 6702(b) penalties

The following documents should be attached to the Form 3210:

The original Form 656 and related attachments discussing the basis for the offer submission.

A copy of the letter or letters issued soliciting a withdrawal of the taxpayer’s ″specified frivolous position″ or desire-to-delay
position.

A copy of any written communication received from the taxpayer in response to the withdrawal solicitation.

The group manager will document approval of the penalty assessment by writing Determination to assess penalty pursuant to IRC 6702(b) approved on the Form 3210 and sign the Form 3210. The request for penalty assessment can be mailed or faxed to Ogden at 801-620-2422.
The Frivolous Return Program at the Ogden Compliance Services Campus will review the documents and process the request for
penalty assessment. Follow-up with Ogden if they do not acknowledge receipt of the Form 3210 within 15 days.

5.8.10.13
(09-27-2011)Taxpayer Files both Doubt as to Liability and Doubt as to Collectibility Offers

When a taxpayer files a Doubt as to Liability (DATL) (Form 656-L) and Doubt as to Collectibility (DATC) (Form 656) at the
same time, consideration of both offers will not occur simultaneously.

In most instances the appropriate action will be the return of the DATC offer, so the DATL offer investigation can be completed
prior to consideration of any DATC issues. When a DATL and DATC offer are submitted simultaneously, the taxpayer should be
contacted (preferably by telephone) and advised both offers cannot be considered at the same time and provide the taxpayer
the opportunity to decide which offer they wish to be investigated. The offer not being considered will be returned. In simultaneous
submission situations, if an application fee and TIPRA payment was submitted with the DATC offer, they will be refunded, if
the DATC offer is returned.

If a DATL or DATC offer is submitted while another offer under a different basis is being investigated; the OE/OS must initiate
contact with the taxpayer and discuss which option the taxpayer would like to pursue. If the taxpayer cannot be contacted
or is unwilling to submit a withdrawal, the offer not currently under consideration will be returned. For example, if a DATC
offer is under investigation, then a DATL offer is submitted, if the taxpayer determines they wish to continue the DATC offer,
return the DATL offer. The taxpayer should also be advised, if the DATC offer was the initial offer being investigated and
is being withdrawn or returned, any application fee or TIPRA payment will not be refunded.

Note:

A taxpayer may submit an additional Form 656 requesting consideration under effective tax administration (ETA) while a Form
656 DATC offer is under consideration. The additional Form 656 should be considered an amended offer and any ETA issues presented
should be considered.

Note:

If a taxpayer submits a Form 656 requesting consideration under ETA while a DATL offer is under consideration, the offer should
be returned as discussed in paragraph (3) above.

If a DATC offer is being returned based on a simultaneous submission, the offer should be closed as a non-processable return
and any application fee or TIPRA payment should be refunded. A DATC offer returned due to being submitted subsequent to a
DATL offer, should also be closed as a non-processable return with any application fee or TIPRA payment refunded. An offer
returned under the provisions of paragraph (3) when the DATC was the original offer being investigated should be closed as
a processable return, which does not allow for the refund of the application fee or TIPRA payment. AOIC histories should be
documented appropriately.

a disagreement listing moral, religious, political, constitutional, conscientious, or similar grounds that reflects a desire
to delay or impede the administration of federal tax laws.

An offer in compromise cannot be considered if it is based solely on a specified frivolous position, or the disagreement reflects
a desire to delay or impede the administration of federal tax laws.You can amend your offer in compromise if you have any non-frivolous basis for compromise you wish to have considered. A non-frivolous
basis can include:

Doubt as to Collectibility - Doubt as to Collectibility exists in any case where the taxpayer's assets and income cannot satisfy
the full amount of the liability.

Doubt as to liability - Doubt as to liability exists where there is a genuine dispute as to the existence or amount of the
correct tax liability under the law.

Effective Tax Administration – Effective Tax Administration is a situation where it is determined that, although collection
in full could be achieved, collection of the full liability would cause the taxpayer economic hardship. Economic hardship
is defined as the inability to pay reasonable basic living expenses.

If you do not have any non-frivolous basis for your offer in compromise and, therefore, do not intend to amend your compromise
proposal you can, instead, withdraw your offer in compromise and avoid the $5,000 penalty imposed under Internal Revenue Code
section 6702(b) for submitting an Offer in Compromise based on a "specified frivolous position" or reflecting a desire to
delay or impede the administration of federal tax laws. Attached is a withdrawal form which may be used for this purpose. Please either amend (on the enclosed Form 656) or withdraw your offer in compromise within 30 days from the date of this letter
by providing a non-frivolous basis for compromise. If we do not hear from you or if you submit another issue that is frivolous,
or reflects a desire to delay or impede the administration of federal tax laws, you will be assessed a penalty in accordance
with Internal Revenue Code Sections 6702(b) and your offer will not be considered. If you submit an amended offer that provides
a non-frivolous basis for consideration, your offer will be forwarded for investigation. Please contact (insert contact name phone number) with any questions or concerns you have regarding this letter.